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The Cooperative Growth Ecosystem refers to a systemic understanding of what helps worker cooperatives thrive and reach a scale that has impact. The ecosystem includes actors – individuals, organizations and institutions – and elements that interact to support or inhibit scaled growth of worker cooperatives. Our framework is inspired and informed by five distinct entrepreneurial ecosystem frameworks from diverse entities: the Babson Entrepreneurship Ecosystem Project, the World Economic Forum, Monitor Group, PolicyLink, and Social Enterprise Greenhouse. Four high-level elements were common to all: financial capital, human capital, business supports, and attitudes and culture. In addition, each had elements related to policy, markets, and education. We include all of these and add elements that we see as critical to the growth and success of worker cooperatives that provide opportunities for low- to moderate-income workers.

 

The Cooperative Growth Ecosystem has eleven elements in all, in three major categories. Essential Elements are the building blocks for robust growth, and scale cannot be achieved without them. Important Elements support growth and can be key drivers or supports for scale initiatives. Environmental Elements legitimize and create demand for worker cooperatives, but do not in themselves support growth or scale.

 

It is important to note that we do not see these parts of the ecosystem evolving in a necessarily linear or sequential fashion; we believe the process is iterative and dynamic. In fact, many ecosystems may begin with a concentration of Environmental Elements or a few Important Elements, and as they develop, they create more Essential Elements.   

ESSENTIAL ELEMENTS: Building Blocks for Scale

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MEMBER SKILLS AND CAPACITY

WHAT THIS ELEMENT IS: this element addresses the heart of worker cooperatives—the people who work in them day to day. It includes existing skill levels and available training in three areas: (1) core job and business functions, (2) cooperative-specific practices, such as democratic governance, and (3) management and entrepreneurial leadership, which we see as essential to growing both individual worker co-ops and a broader worker co-op sector.

WHY IT MATTERS: in order to grow beyond a very small size and build community wealth, worker co-ops need to effectively exercise management functions, such as planning, market positioning, hiring, and accountability; governance functions, such as strategy and policy development; and entrepreneurial leadership to drive growth and smart risk-taking. A thriving worker co-op will have entrepreneurial drive among many worker-owners and may or may not have dedicated management positions. When worker-owners have low levels of formal education, limited business experience, or multiple barriers to employment, experienced managers can bring business expertise and also cultivate entrepreneurial leadership among all cooperative members.   

 

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FINANCING

WHAT THIS ELEMENT IS: in order to meet community economic development goals, a robust Cooperative Growth Ecosystem needs ample amounts of patient capital in a variety of forms, including:

 

Equity: Equity includes internal equity (member investment and reinvested profits) and external equity (outside investment). Though not common, non-member investments such as non-voting preferred stock can play an important role in supporting expansion of existing cooperatives. Community and crowdsourced capital, from Kickstarter to direct public offerings, can provide initial investment for startups or funding for special projects or strategic needs.

Debt: Many worker co-ops take out loans from community development financial institutions (CDFIs) and cooperative-specific revolving loan funds. Larger, well-established worker co-ops are often able to access lines of credit or loans from traditional banks.

Grants: Philanthropic capital can drive worker co-op development through grants to nonprofit co-op developers working in low- to moderate-income communities. Grants generally pay for training, management, administration, and other support services needed to start and grow co-ops with low-income first-time entrepreneurs. Philanthropic capital can play a key role in mitigating risk for investors and lenders by funding robust technical assistance and support. It is not typically used to purchase equipment or build cash reserves.

WHY IT MATTERS: Financing is essential for the startup and growth of all businesses, and worker co-ops, while no exception, experience unique challenges in this area that can limit their growth unnecessarily. Experienced cooperative developers have identified absence of equity, and thus over-reliance on debt, as a primary reason for the undercapitalization and resulting failure of worker co-ops in the past. Conversely, values-aligned outside investment has been a catalyst for growth in a number of worker cooperatives, as has grant funding for successful co-op development efforts in low-income communities.  

 

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TECHNICAL ASSISTANCE

WHAT THIS ELEMENT IS: Technical assistance (“TA”) includes attorneys and accountants (CPAs) who have specific knowledge of worker cooperatives. Other less recognized but equally important types of technical assistance include organizational development, conflict resolution or mediation, human resources, governance, and general business advice.

WHY IT MATTERS: Technical assistance is critical for worker cooperatives, given their unique and somewhat complex organizational, legal, and capital structures. Cooperative-knowledgeable attorneys have historically played a strong development role in startup worker cooperatives. Co-ops also need knowledgeable local TA providers throughout their life cycle, as growth brings new challenges in diverse areas such as human resources, commercial property negotiations, regulatory issues, restructuring of bylaws and equity, dispute resolution, and capital planning.  

 

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GROWTH-ORIENTED CO-OP DEVELOPERS

WHAT THIS ELEMENT IS: The co-op developers element is unique to our Cooperative Growth Ecosystem. Most worker co-ops that create quality jobs for low-wage workers and many of the larger worker co-ops in the country were formed through an explicit process of incubation and acceleration whereby a third party – either a nonprofit co-op developer or an association of cooperatives – brings critical capacity to the table and drives the co-op’s growth. [1] Co-op developers provide some or all of the following services for the cooperatives they support: recruitment and training of worker-owners, technical assistance, direct support to co-op governance, management services, and administrative support, including back-office services. Developers that aim to create larger or multiple job-creating worker co-ops bring an explicit growth orientation and usually provide the full spectrum of services, make or broker capital investment in the cooperative, play a stronger role in co-op management, and often have voting or non-voting seats on co-ops’ boards of directors for some period of time.

WHY IT MATTERS: Co-op developers are an essential element of our ecosystem because they play a key role in the development and growth of co-ops that work with low-wage workers and fulfill community economic development objectives.  

 

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IMPORTANT ELEMENTS: Accelerate Growth

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BUSINESS SUPPORTS

WHAT THIS ELEMENT IS: The business supports element of a Cooperative Growth Ecosystem contains both private and public supports: (1) advisory services, business networks, industry-specific trade and manufacturing associations, incubators and accelerators, and microenterprise development organizations; and (2) public workforce and economic development programs.

WHY IT MATTERS: Accessing the mainstream business supports that have helped small businesses of all kinds play a vital role in our economy is important for broader uptake of the cooperative model. In a robust ecosystem, business advisors would include co-ops on the menu of business forms available to entrepreneurs, provide basic advice to cooperative businesses, refer clients to service providers with expertise in worker co-ops, and become partners in advocacy efforts that integrate cooperatives into a broader spectrum of small business and workforce development strategies. Connecting to existing infrastructure and funding for workforce development could be a scale strategy for worker cooperative developers focused on low-income and semi-skilled workers.  

 

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CONNECTION TO MARKET

WHAT THIS ELEMENT IS: The connection-to-market element of a Cooperative Growth Ecosystem focuses on special connections to market through strategic partnerships with key institutional customers that can help them grow and diversify, including:

– Anchor institutions such as universities and hospitals,

– Early mission-aligned customers or other major players along the supply chain, and

– Publicly funded entities that have socially or environmentally driven purchasing policies.

WHY IT MATTERS: Having a sound market strategy and connecting successfully with customers are fundamental activities of any successful business, but focused strategies to open new markets can spur growth more quickly. Conventional businesses develop protected and proprietary markets through all means available to them, including personal relationships, policy influence, and preferential purchasing policies, and cooperatives can also benefit from such strategies.  

 

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POLICY

WHAT THIS ELEMENT IS: Policy supports for worker co-ops at the local, state or federal level could include the following:

– Public funding for growth-oriented co-op developers and high-quality technical assistance

– Incentives or tax benefits for cooperatives, or adaptation of other business incentive programs, such as local or minority- and women-owned businesses, to suit co-ops

– Pro-cooperative procurement policies that create markets through government purchasing

– Removal of administrative barriers to co-op formation

– Supportive regulatory frameworks

WHY IT MATTERS: In parts of the world where worker co-ops have become a measurable part of the economy, such as Quebec, Northern Italy, and France, public policy has played a significant role, encompassing a range of policies, from basics such as standard corporate entity definitions and public funding for co-op development, through to more complex policy such as providing tax incentives for cooperative ownership and linking unemployment insurance to equity investment in startup cooperatives.   

 

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ADVOCACY PARTNERSHIPS

WHAT THIS ELEMENT IS: Advocacy partnerships can advance supportive policy and public awareness. Worker co-ops currently have working alliances with other cooperative sectors, selected small business associations, and localist groups. Recently they have begun to develop a broad range of potential advocacy partnerships with community organizing groups, to be a positive alternative for community empowerment. These nascent alliances include partnerships with labor unions and employee ownership organizations to advocate for quality jobs; and with New Economy, impact investment/social capital, racial justice, and sustainability groups to position worker cooperatives as a pathway for creating a fairer economy for all.

WHY IT MATTERS: Since the Great Recession began in 2008, public demand for fairer business models has grown, and many community organizing and advocacy organizations have become interested in worker cooperatives. Such organizations can play an important role in galvanizing public support for co-ops and advocating for funding for growth-oriented worker co-op development (Essential Elements) and for policies and special market connections (Important Elements) that can help bring the worker co-op sector to scale.  

 

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ENVIRONMENTAL ELEMENTS: Legitimize and Mainstream Cooperative Businesses

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VALUES-DRIVEN BUSINESS

WHAT THIS ELEMENT IS: This element includes the strength of the existing worker co-op community in a region, including any formal networks or infrastructure supporting it, as well as the number of other kinds of values-driven businesses and their level of engagement. Some like-minded business models include:

– Other kinds of cooperatives, such as consumer co-ops, food co-ops, credit unions, rural electric co-ops, and business-to-business or purchasing co-ops

– Employee Stock Ownership Plans or ESOPs [2]

– Certified B Corporations [3]

– Other kinds of “triple bottom line” businesses or social enterprises

WHY IT MATTERS: Success breeds success. Businesses that have values woven into their DNA tend to do things a little differently and to embrace and encourage like-minded companies. Worker cooperatives have a long tradition of supporting each other by sharing best practices in cooperative-specific areas such as democratic governance, providing financing to startups, lending to one another, collaborating on training, doing joint marketing and purchasing, and creating solidarity funds to help one another through rough times. Extending this cooperative habit—which makes good business sense as well as values sense—to other forms of allied businesses would expand worker cooperatives’ reach and relationships. 

 

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ATTITUDES AND CULTURE

WHAT THIS ELEMENT IS: This element includes distinct components that can help create a needed cultural shift: general awareness of cooperatives among businesses, social movements, and the public; coverage of co-ops in mainstream and alternative media; the presence and visibility of successful co-ops in local communities; and local support for alternative economic models.

WHY IT MATTERS: In places where cooperatives are embedded in the local culture to a great degree, we see several positive effects: consumer loyalty, advocacy strength, institutional support, cooperative development as an accepted strategy for community economic development, and ultimately more people starting their own small businesses as cooperatives.

 

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COOPERATIVE EDUCATION

WHAT THIS ELEMENT IS: This element encompasses education about worker cooperatives within formal educational institutions (graduate, undergraduate and K-12), and the degree to which worker cooperatives are included in entrepreneurship education and community training programs.

WHY IT MATTERS: Educational institutions have an important role to play by educating the general population for long-term culture change, training business leaders to lead cooperative businesses, and fulfilling the research needs of a growing cooperative business community. In other parts of the world where worker co-ops thrive in much larger numbers, educational institutions are an active part of the cooperative ecosystem, teaching students at all levels about co-ops, conducting academic research, and performing research and development functions for the cooperative community. Mondragon, for example, began with a technical school and has its own university with a robust R&D arm.

 

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